Pump Market Analysis
by Jordan, Knauff & Company

The Jordan, Knauff & Company (JKC) Valve Stock Index was down 10.5 percent over the last 12 months, while the broader S&P 500 Index was up 1.0 percent. The JKC Pump Stock Index decreased 16.9 percent for the same time period.1

Stock indices from July 1, 2015, to June 30, 2016Figure 1. Stock indices from July 1, 2015, to June 30, 2016. Source: Capital IQ and JKC research. Local currency converted to USD using historical spot rates. The JKC Pump and Valve Stock Indices include a select list of publicly traded companies involved in the pump and valve industries weighted by market capitalization.

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) increased to 53.2 percent in June from 51.3 percent in May, its strongest reading since February 2015. Manufacturing registered growth for the fourth consecutive month, as 12 of the 18 industries reported an increase in new orders and production in June. Export orders increased 1.0 point to 53.5 percent, its highest level in more than a year and a half. The Employment Index managed to move back into expansion territory at 50.4 percent after six months of below 50 percent readings. U.S. manufacturing jobs fell by an average of 13,000 per month between February and May.

The U.S. economy added 287,000 jobs in June, and the unemployment rate rose to 4.9 percent. Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment in other major industries, including construction, manufacturing, wholesale trade, transportation and warehousing, and government, showed little or no change. Employment in mining continued to trend down. From April through June, the U.S. added an average of 147,000 jobs per month, down from an average of 282,000 in the fourth quarter of 2015.

U.S. energy consumption and rig countsFigure 2. U.S. energy consumption and rig counts. Source: U.S. Energy Information Administration and Baker Hughes Inc.

Last year, fossil fuels made up 81.5 percent of total U.S. energy consumption, the lowest level in more than 100 years. At 10 percent, renewables’ share of energy consumption was at its highest level since the 1930s. Solar and wind generation accounted for the greatest growth in renewables over the past 10 years. Coal consumption fell 13 percent in 2015, the highest annual percentage decrease of any fossil fuel in the last 50 years.

In the first half of 2015, China and Argentina led shale resource development outside North America and have the potential to increase their production significantly. China drilled more than 200 shale gas and tight oil wells, and Argentina drilled more than 275 since the beginning of 2014. While still short of reaching commercial production, Algeria, Australia, Colombia, Mexico, Poland and Russia began exploring and producing either natural gas or crude oil from shale and other tight resources in 2015.

U.S. PMI and manufacturing shipmentsFigure 3. U.S. PMI and manufacturing shipments. Source: Institute for Supply Management Manufacturing Report on Business and U.S. Census Bureau

On Wall Street, the Dow Jones Industrial Average gained 0.8 percent, the S&P 500 Index was up 0.1 percent, and the NASDAQ Composite declined 2.1 percent for the month of June. For the full second quarter, both the Dow Jones and S&P 500 showed gains for the third consecutive quarter, rising 1.4 percent and 1.9 percent, respectively. The NASDAQ declined 0.6 percent for the second quarter. The unanticipated vote of Britain to leave the European Union, May’s discouraging jobs report and the Federal Reserve Bank’s reluctance to raise interest rates all had a dampening effect on the markets.

Reference
1. The S&P Return figures are provided by Capital IQ.

These materials were prepared for informational purposes from sources that are believed to be reliable but which could change without notice. Jordan, Knauff & Company and Pumps & Systems shall not in any way be liable for claims relating to these materials and makes no warranties, express or implied, or representations as to their accuracy or completeness or for errors or omissions contained herein. This information is not intended to be construed as tax, legal or investment advice. These materials do not constitute an offer to buy or sell any financial security or participate in any investment offering or deployment of capital.